22 Feb, 24

The Importance of Price Streaming for Trading

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Zerocap

Zerocap

Price streaming for trading is a revolutionary approach that significantly influences the trading landscape, especially in the realm of online and algorithmic trading. It involves the continuous, real-time transmission of asset prices to traders and investors, enabling them to make more informed decisions quickly and efficiently.

The Evolution of Price Streaming

Price streaming has evolved from traditional trading methods, where prices were updated at much slower intervals. Today, big investment banks like Morgan Stanley, UBS, and Goldman Sachs offer clients direct feeds of prices for various securities, such as US and European corporate bonds. This development has opened up new execution models for the buy-side, allowing for automation in trading and maintaining bilateral relationships with clients​​.

The Role of Latency in Price Streaming

Latency plays a crucial role in price streaming and trading. It determines how quickly traders can receive market data, place orders, and secure the desired prices. High-frequency traders, leveraging advanced algorithms and software, aim to minimize latency to gain a competitive edge. They often employ strategies like latency arbitrage, exploiting inefficiencies in market data transmission to profit from slight price differences between brokers​​.

Advantages of Price Streaming

Price streaming offers several advantages for both traders and brokers. For traders, it ensures access to the most current market prices, facilitating timely and strategic trading decisions. Brokers, on the other hand, can offer better price streaming by adding proxy servers to their network, reducing server load, and enhancing clients’ access to real-time data. This setup helps in mitigating the impact of latency arbitrage and improves the overall trading experience​​.

Challenges and Solutions

Despite its benefits, price streaming faces challenges such as the risk of latency arbitrage, where traders exploit latency differences for profit. To address these issues, brokers can employ strategies like limiting server exposure and setting up proxy servers closer to clients to reduce overall latency and improve data transmission speed​​.

Conclusion

Price streaming for trading is an essential development in the financial markets, offering real-time data that enables traders to make informed decisions swiftly. While it comes with challenges like latency arbitrage, innovative solutions are continuously developed to ensure efficient, transparent, and fair trading environments.

FAQs

  1. What is price streaming for trading?
    • Price streaming for trading is the continuous transmission of real-time asset prices to traders, enabling them to make informed decisions quickly.
  2. How does latency affect price streaming?
    • Latency affects the speed at which traders receive market data and can execute trades, influencing their ability to secure desired prices.
  3. What are the advantages of price streaming?
    • Price streaming offers real-time data access, facilitating timely decisions, and allows for the automation of trading strategies.
  4. What challenges does price streaming face?
    • Challenges include latency arbitrage, where traders exploit latency differences to gain unfair advantages in trading.
  5. How can brokers mitigate the impact of latency arbitrage?
    • Brokers can reduce the impact of latency arbitrage by improving their network’s data transmission speed, limiting server exposure, and setting up proxy servers closer to clients to reduce overall latency.

About Zerocap

Zerocap provides digital asset liquidity and digital asset custodial services to forward-thinking investors and institutions globally. For frictionless access to digital assets with industry-leading security, contact our team at [email protected] or visit our website www.zerocap.com

DISCLAIMER

This material is issued by Zerocap Pty Ltd (Zerocap), a Corporate Authorised Representative (CAR: 001289130) of AFSL 340799. Material covering regulated financial products is issued to you on the basis that you qualify as a “Wholesale Investor” for the purposes of Sections 761GA and 708(10) of the Corporations Act 2001 (Cth) (Sophisticated/Wholesale Client). This material is intended solely for the information of the particular person to whom it was provided by Zerocap and should not be relied upon by any other person. The information contained in this material is general in nature and does not constitute advice, take into account the financial objectives or situation of an investor; nor a recommendation to deal. Any recipients of this material acknowledge and agree that they must conduct and have conducted their own due diligence investigation and have not relied upon any representations of Zerocap, its officers, employees, representatives or associates. Zerocap has not independently verified the information contained in this material. Zerocap assumes no responsibility for updating any information, views or opinions contained in this material or for correcting any error or omission which may become apparent after the material has been issued. Zerocap does not give any warranty as to the accuracy, reliability or completeness of advice or information which is contained in this material. Except insofar as liability under any statute cannot be excluded, Zerocap and its officers, employees, representatives or associates do not accept any liability (whether arising in contract, in tort or negligence or otherwise) for any error or omission in this material or for any resulting loss or damage (whether direct, indirect, consequential or otherwise) suffered by the recipient of this material or any other person. This is a private communication and was not intended for public circulation or publication or for the use of any third party. This material must not be distributed or released in the United States. It may only be provided to persons who are outside the United States and are not acting for the account or benefit of, “US Persons” in connection with transactions that would be “offshore transactions” (as such terms are defined in Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”)). This material does not, and is not intended to, constitute an offer or invitation in the United States, or in any other place or jurisdiction in which, or to any person to whom, it would not be lawful to make such an offer or invitation. If you are not the intended recipient of this material, please notify Zerocap immediately and destroy all copies of this material, whether held in electronic or printed form or otherwise.
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